The Next 4 Billion – Innovations Article

In response to some demand from readers and suggest-ers (not a word, I know), I’m posting the article that Al, Bill, Julia, Cory and I wrote in Innovations. Click “read more” for access to the PDF. Here are the first few paragraphs.

Full review of the journal coming soon — perhaps after I return from vacation. Is it bad that I want to read the whole journal while on holiday? Phil Auerswald, don’t let me down now!

In an informal suburb of Guadalajara, Mexico, a growing family is struggling to expand its small house. Help arrives from a major industrial company in the form of construction designs, credit, and as-needed delivery of materials, enabling rapid completion of the project at less overall cost.

In rural Madhya Pradesh, an Indian farmer gains access to soil testing services, to market price trends that help him decide what to grow and when to sell, and to higher prices for his crop than he can obtain in the local auction market. The new system is an innovation of a large grain-buying corporation, which also benefits from cost saving and more direct market access.

A South African who lives in an impoverished, crime-ridden neighborhood of Johannesburg has no bank account, cannot order items from a distant store, and is sometimes robbed of her pay packet. She finds that a new financial service offered by a local start-up company allows her mobile phone to become a solution?her pay is deposited directly to her phone-based account, she can make purchases via an associated debit card, and she carries no cash to steal.

In a small community outside Tianjin, China, a small merchant whose children have been repeatedly sickened by drinking water from a heavily-polluted river is distraught. He finds help not from the overwhelmed municipal government but from a new, low-cost filtering system, developed by an entrepreneurial company, which enables his family to treat its water at the point of use.

Four billion people such as these form the base of the economic pyramid (BOP)?those with incomes below $3,000 (in local purchasing power). The BOP makes up 72% of the 5.75 billion people recorded by available national household surveys worldwide and an overwhelming majority of the population in the developing countries of Africa, Asia, Eastern Europe, and Latin America and the Caribbean?home to nearly all the BOP.

This large segment of humanity faces significant unmet needs and lives in relative poverty: in current U.S. dollars their incomes are less than $3.35 a day in Brazil, $2.11 in China, $1.89 in Ghana, and $1.56 in India. Yet together they have substantial purchasing power: the BOP constitutes a $5 trillion global consumer market.